April CPI eased to 3.4 from 3.5 in March

[pooya87]

I don't want to start a new topic about this yet so I'll ask here: what do you guys think about the new stupid "tariff war" the idiots in Washington are starting with China?

I think the last biggest time (which could be categorized as a "tariff war") was in Trump administration and the Chinese retaliation put an stop to it because US economy couldn't withstand it. But back then US economy wasn't experiencing inflation+recession at the same time like it is today.

[Wind_FURY]

windfury keeps assuming bitcoin is dependant on US financial news for the reasons of bitcoins dips/surges, he has many times try to promote nonsense linkages of coincidence.

 

You're probably right, but the market is made up of people who often become irrational. So although the market always returns to a state of efficiency, there definitely are times that dips and surges happen because of irrationality caused by bullish news, bearish news, greed, and fear.

Plus did I actually say that it's absolutely "dependent"?

¯\_(ツ)_/¯

[DanWalker]

But with news that inflation is showing signs of going down, we can expect inflation to drop below 2% soon and the Fed to lower interest rates soon. In particular, people are more optimistic and believe that the Fed will lower interest rates twice this year as inflation is gradually being controlled.

Inflation has only shown signs of being "sticky" not signs of going down.
For it to go down the chaos in the world has to calm down, energy prices have to come down, the supply chain disruptions have to stop, etc. then we can start seeing inflation start coming down and then we can see them lower the rates. None of it is happening yet though.

I agree with what you said, real inflation has not improved too much and is still high. But CPI in April was at 3.4% and lower than before. Looking at that, we cannot be said that inflation has not shown signs of decreasing, it has decreased but quite slowly.

In addition, I think if we wait until the world situation calms down, energy prices decrease, supply and demand are not interrupted... then make the decision to reduce interest rates, I think interest rate cuts will never be possible. Because interest rates are being maintained at too high a level today, it is also said to be one of the many reasons making it more difficult for the economy to recover. Maintaining interest rates at high levels is no different from a double-edged sword, it can curb rising inflation but will also make the economy more stagnant, even falling into recession. So I think that's why the Fed still needs to cut rates first and there will be at least one or two rate cuts this year.

[pooya87]

I agree with what you said, real inflation has not improved too much and is still high. But CPI in April was at 3.4% and lower than before. Looking at that, we cannot be said that inflation has not shown signs of decreasing, it has decreased but quite slowly.

That's true but I'd say "signs of decreasing" is what we saw in the second half of 2022 where inflation rate came down from 9.1% in June to 8.3% in July (0.8% decrease in 1 month) and continued going down consistently every month until it reached 3% a year later (6% decrease in a year). But it has been "sticky" ever since, going up and down from 3% to 3.7%.

0.1% decreased in one month is not like that in my opinion, specially as long as it stays above 3%. However if we see another reduction next month, and see inflation at something like 2.9% it could be a positive sign and we can hope for a possible interest rate cuts.

[Wind_FURY]

But with news that inflation is showing signs of going down, we can expect inflation to drop below 2% soon and the Fed to lower interest rates soon. In particular, people are more optimistic and believe that the Fed will lower interest rates twice this year as inflation is gradually being controlled.

Inflation has only shown signs of being "sticky" not signs of going down.
For it to go down the chaos in the world has to calm down, energy prices have to come down, the supply chain disruptions have to stop, etc. then we can start seeing inflation start coming down and then we can see them lower the rates. None of it is happening yet though.

I agree with what you said, real inflation has not improved too much and is still high. But CPI in April was at 3.4% and lower than before. Looking at that, we cannot be said that inflation has not shown signs of decreasing, it has decreased but quite slowly.

In addition, I think if we wait until the world situation calms down, energy prices decrease, supply and demand are not interrupted... then make the decision to reduce interest rates, I think interest rate cuts will never be possible. Because interest rates are being maintained at too high a level today, it is also said to be one of the many reasons making it more difficult for the economy to recover. Maintaining interest rates at high levels is no different from a double-edged sword, it can curb rising inflation but will also make the economy more stagnant, even falling into recession. So I think that's why the Fed still needs to cut rates first and there will be at least one or two rate cuts this year.

But if the Federal Reserved does cut rates, won't that cause reinflation, then therefore Jerome Powell would need to increase rates higher than 5.5%? That would be worse than the economy and make the "soft landing" less probable, which already IS improbable in my opinion.

[pooya87]

Another reason why United States will not lower interest rates in the foreseeable future is all the "debt" they've sold to stupid countries who would buy those bonds.

You see when interest rates are high, US government also has to pay a high interest on the bonds they sell stupid countries (one of the reasons they print $1 trillion every 100 days). If they lower those rates, that means they will also pay those countries less interest. That means the incentive for those countries to baghold these things go down quickly and they WILL start dumping them. That is US debt they would be dumping and the damage on US economy that is experiencing inflation and recession would be high.

Therefore FED has to keep the interest rates high to keep the incentive to baghold this garbage up and continue printing trillions to pay those debt bagholders until the day they can handle that inevitable dump when the rates are cut...

BTW have you noticed how China has been continuously dumping? They were once bag-holding more than $1.3 trillion of US debt and today that is down to $0.76 trillion despite the high interest rates... this is not a good sign (is Taiwan invasion imminent?)
https://ticdata.treasury.gov/resource-center/data-chart-center/tic/Documents/slt_table5.html

[Fortify]

Legacy and the cryptocurrency markets have rebounded today after the latest CPI print came out as expected with 3.4 - down a little from the previous month with 3.5 during March.

You can see how it currently looks in this bar chart, https://www.investing.com/economic-calendar/cpi-733

If the CPI prints another small decrease during the next report, both legacy and cryptocurrency markets could surge to new all time highs. But to play the devil's advocate, isn't the sudden change of mood to extreme bullishness also inflationary?

A change of 0.01 is insignificant, a rounding error almost and oftentimes these can be corrected in later months when more data becomes available. What is useful to know is the general trend and whether it starts to plateau or we see spikes upwards again. It's a good sign that inflation may be coming under control and that interest rates might start to drop again. Who knows how that will effect bitcoin though, as it reacts very erratically. What we will see is money becoming more easily available again and lower borrowing rates for cash, which some speculators might choose to drop back into crypto. It's all a big guessing game at the moment and one small external jolt could jeopardize it all.

[adaseb]

Yes I saw it rally and I looked at the CPI print and was surprised it was only a surprise number off by 0.1%. I am thinking that the markets are just illiquid in May and they swing high and low in both directions on insignificant news.

I don’t know why they treat the monthly CPI as important when in the past we had very low inflation one month and the next month very high inflation. A better indicator would be perhaps a 3 month average which is smoothed out over the longer term.

[Wind_FURY]

PCE lower month-on-month - which indicates that inflation might be going lower, caused a surge in legacy markets and liquidated the short-sellers. 👍

But PMI was also lower month-on-month - which creates fear that a contraction in the economy will probably happen, caused traders to sell and liquidated the long-buyers.

[adaseb]

Today the bank of Canada finally lowered interest rates by 0.25%. It’s scary what will happen next. Will it be a repeat of the 1970s where they cut rate too early and we ended up with inflation higher than the previous pivot?

The cpi is still not at the target rate of 2% but it’s trending down. So maybe they made the correct move but if still spurs massive amount of people buying real estate and causes rents to go up higher then I cannot see this ending well.

Wonder if the USA will cut rates sometime this year. Their CPI is also far from their 2% target.

[pooya87]

Today the bank of Canada finally lowered interest rates by 0.25%. It’s scary what will happen next. Will it be a repeat of the 1970s where they cut rate too early and we ended up with inflation higher than the previous pivot?

It is worth mentioning that the interest rate was lowered from 5% down to 4.75% which was high considering we are talking about 3.5% rates here. But I don't think we can predict the outcome of it at this point. Not to mention Canadian economy has major differences from US economy, which also means consequences of lowering rates is not of the same type.

Hopefully recession stops so we can see bitcoin price rise smoother with less sell pressure.

[Iranus]

Today the bank of Canada finally lowered interest rates by 0.25%. It’s scary what will happen next. Will it be a repeat of the 1970s where they cut rate too early and we ended up with inflation higher than the previous pivot?

The cpi is still not at the target rate of 2% but it’s trending down. So maybe they made the correct move but if still spurs massive amount of people buying real estate and causes rents to go up higher then I cannot see this ending well.

Wonder if the USA will cut rates sometime this year. Their CPI is also far from their 2% target.

It will all depend on the health of their economy and with recent indicators such as CPI, PPI, unemployment rate reports...all pointing towards the Fed having 2 interest rate cuts this year. But as we all know the Fed is still very cautious to make a final decision and waiting is what we can do for now.

Besides Canada, there is also notable news from ECB that they may also start reducing interest rates this week, and if this happens, it will likely be a driving force and catalyst for the Fed to consider lowering interest rates.

Personally, I'm optimistic about the Fed lowering interest rates this year because at least this year they have a presidential election.

https://www.euronews.com/business/2024/06/04/ecb-expected-to-cut-interest-rates-this-week-what-you-need-to-know

[stompix]

The cpi is still not at the target rate of 2% but it’s trending down. So maybe they made the correct move but if still spurs massive amount of people buying real estate and causes rents to go up higher then I cannot see this ending well.

People who have waited for a 0.25% cut to buy real estate will top if the price goes over 5%, for them, it will make no sense to have waited that long for a moment to buy at an advantage and then pay extra for that asset. The threat of a rebound in inflation when everyone is aware of that threat dies down by the day, there is a limit to how much it can bounce.

Besides, I find it funny how some are already preaching the end of the Western economies because wow, a cut of 1% in the interest rate will be catastrophic to the 3% inflation, how about we look at BRICS for example:

Russia   16   
Brazil   10.5   
South Africa   8.25   
India   6.5

All of them except China which is facing deflation have way higher both interest rates and inflation, so what will happen if countries that are 3 times worse than the US will try to cut them?

Another reason why United States will not lower interest rates in the foreseeable future is all the "debt" they've sold to stupid countries who would buy those bonds.

Yeah, how bad this is for the US, meanwhile in your country:

Iran had raised the interest rates from about 15 percent to about 22.5 percent exactly to prop up the rial, a move that failed to strengthen the national currency. Central Bank has authorized the issuance of this specific type of deposit bond with a total value of 2.8 quadrillion rials, or about$5.6 billion

Zimbabwe vibes, quadrillions...